Legendary corporate raider Sir Ron Brierley and car dealer Neville "Croaky" Crichton were prominent New Zealand investors in Cascade Coal, which is now the subject of an investigation by the NSW Independent Commission Against Corruption (ICAC).

The full list of investors reads like a who's who from Sydney's monied eastern suburbs. They all purchased shares in the company in November 2010, in a sale led by veteran stockbrokers Brent Potts and Peter Gray.

Days later, Cascade agreed to sell itself to Australian miner White Energy for A$500 million.

Was it illegal? Was it controversial? Or was it both?

These were the questions occupying the independent directors of White Energy who were worried about their company's A$500m offer for a company whose only asset was a $1m exploration licence, possibly acquired corruptly.

The question before the ICAC is how Cascade Coal obtained that Hunter Valley exploration licence. The commission has heard allegations that Cascade directors might have tried to mislead the NSW government by concealing the involvement of former state resources minister Eddie Obeid and his family in dealings surrounding the company's Mt Penny coal project near Bylong.

There has been no suggestion investors such as Brierley or Crichton knew their money would find their way to the Obeid's interests, in fact they were assured explicitly that it would not.

The Kiwi pair invested alongside a host of Sydney eastern suburbs figures including mining identity Peter "Talky" Newton and his Monaco-based friend Bobby Pittorino among a wealthy group who invested A$28m for a 7.23 per cent interest in Cascade.

The investors stood to gain 25.5 per cent on their investment if the deal with White Energy went ahead. It didn't and now they own

shares in a private exploration company with an uncertain future. The inquiry into possible corrupt conduct could make it difficult to sell the company or convert the exploration licence into a mining lease.

The corruption inquiry heard there were rumours that the family of Obeid was secretly involved in Cascade Coal, awarded one of the controversial exploration licences in a 2009 public tender run by the then resources minister, Ian Macdonald.

The possible involvement of the Obeids was troubling Graham Cubbin, a non-executive director of White Energy. Also worrying was that Cascade was owned by several White Energy directors, including Brian Flannery, Travers Duncan, John Kinghorn and John McGuigan, who were to be paid A$500m for a coal licence Cascade had bought from the NSW government for only A$1m.

Cubbin told the Independent Commission Against Corruption he had no idea who had valued Cascade at $500m in November 2010. The commission heard it had been valued at only A$25m earlier in the year.

Cubbin said he was assured by Cascade the Obeid family had no involvement in Cascade. The truth was the Obeids secretly owned 25 per cent of Cascade and they had negotiated with Cascade for a A$60m payout, having earlier tried to extract A$100m.

The Obeids' former lawyer, Sevag Chalabian, told the commission of the elaborate lengths Richard Poole, an investment banker at Arthur Phillip and Cascade director, had gone to to hide the Obeids' interest. Chalabian agreed with the counsel assisting, Geoffrey Watson, SC, that Poole was worried about the "whiff of corruption" if it became known the Obeids were in on the Cascade deal. The Obeids' involvement could also result in the government cancelling the exploration licence.

The commission is investigating allegations Macdonald provided inside information to the family of then upper house MP Obeid, which allowed the Obeids to acquire holdings in two of the successful bidders for coal exploration licences.

The inquiry heard Eddie Obeid Jr ran messages between Poole and Chalabian over the payment of the first A$30m to the Obeid family, part of which was paid through Poole's wife's bank account.

Cubbin said he would have been "shocked and incredibly worried" if he knew the $30m was being paid to the Obeids to "sanitise Cascade Coal".

Instead, documents reveal Poole told Cubbin he was not aware "of any payments being made to Eddie Obeid or any entities associated with him or to other Labor Party politicians".

The inquiry also heard associates of Poole and McGuigan created a series of fake letters in 2008 pretending to be mining companies asking Macdonald to reopen the tender.

Macdonald did reopen the tender and Cascade won the Mt Penny exploration licence.

Neil Whittaker, a former chief executive of the National Rugby League, now an executive with White Energy, was grilled on Monday about signing one of these letters on the letterhead of a non-existent company.

Meanwhile, one of the Sydney investors, resources adviser Wayne Seabrook of Ironstone Capital, said he never expected to find his investment in this position. Other investors include property developer Denis O'Neil and his son Ned. Lawyers representing O'Neil's company, Addenbrooke, have been given permission to appear before the inquiry and could seek to question witnesses.

The November group of investors' 7.23 per cent stake was diluted earlier this year when Japanese group Nichi Gas bought shares in a new share issue.

A draft document setting out the terms of the 2010 capital raising said the money would be applied to "reduce third-party debt and creditors".

By that time, it had been well publicised that Obeid and his associates owned the land under Cascade's Mt Penny coal licence.

Sources have said the group of new investors was not told Obeid and his associates also owned a 25 per cent stake in an unincorporated mining joint venture with Cascade until shortly before the share sale in 2010.

The Obeid group was removed from the Cascade register through a transaction organised by Poole. He used a private company as an intermediary to transfer funds to the Obeid interests, classed as a "third party debt".

After Cascade's attempt to sell itself to White Energy failed, Poole's private company, Coal and Minerals Group, was unable to make other agreed payments.

That means Obeid's group now has security over a 9.3 per cent stake in Cascade, effectively making it an investor alongside the Sydney group.

O'Neil company Addenbrooke, which has proposed to redevelop the Rose Bay Marina in Sydney, held the largest stake of the group, through a nominee company, Lost Ark. Addenbrooke had invested A$8m as part of the A$28m raising. The second largest investor was a group including Crichton, which tipped in A$5m. Newton and Pittorino, who sold gold group Hill 50 to South African giant Harmony Gold a decade ago, were also part of the same group. Newton is a director of rugby league team the Roosters, based in Sydney's eastern suburbs.

Brierley put in $3m.

Other participants included the children of Cascade investor and one-time director Travers Duncan, at the time chairman of White Energy. Duncan's daughter Andromeda, the business development counsel of White Energy, invested A$1m.

On the draft equity raising documents, Duncan is listed as a "consultant" to Cascade who is "directly involved in the day-to-day operations of the company". That is despite him having resigned from the Cascade board more than a year earlier, shortly after it was clear it had secured the Mt Penny project through a NSW government tender now the subject of the ICAC inquiry.

Duncan was due to appear before the inquiry last week, as was James McGuigan, an executive at Cascade.

Other investors in the A$28m raising included stockbrokers Richard Granger and Rex Adams, who now work alongside Potts and Gray at Blue Ocean Equities. Potts is a 40-year veteran stockbroker. Seabrook and Simon Keyser of Ironstone Capital also tipped in funds, along with Nanuk Asset Management investment committee member Ivan Wheen.

"I'm sure a lot of them would be pretty upset they had put in money at a reasonable valuation," one market source said of their investment, which was based on Cascade's equity being valued at A$387m. The price of thermal coal has plunged and mining costs have continued to rise since the investment two years ago, and even without the complication of the ICAC inquiry, it is possible the value of Cascade's Mt Penny deposit might have decreased significantly.

White Energy abandoned the Cascade takeover in April 2011. John McGuigan and John Atkinson have since resigned as directors of White Energy but remain directors of Cascade Coal. Duncan, John Kinghorn and Brian Flannery, all of whom are investors in Cascade, remain directors of White Energy.

Atkinson, Flannery and Kinghorn were also due to appear before the inquiry last week.